Dollar-denominated gold moved to its highest price in more than a year on Friday after the U.S. Dollar fell to a 2-1/2 low against a basket of currencies. This made gold more attractive to foreign investors.
December Comex Gold settled at $1351.20, up $20.80 or +1.56%.
Gold was also supported by a decline in U.S. bond yields, which held near 10-month lows. The market was underpinned as investors continued to digest the comments made by the ECB, after it decided to leave its benchmark interest rate unchanged at its September meeting on Thursday.
ECB President Draghi said he was confident the Euro Zone's inflation will move towards the bank's target but warned that downside risks remained.
Gold traders were also keeping an eye on political and geopolitical events. In Washington, the key story is talk of a short-term extension of the debt ceiling and government funding plan. Internationally, investors are paying close attention to North Korea. There are rumors the rogue nation will test another nuclear weapon this week-end.
Forecast
This week, gold investors will get the opportunity to react to several major U.S. economic reports. They include data on Producer Prices, Consumer Prices, Weekly Unemployment Claims and Retail Sales. However, the major focus for the week will be on the economic impact of Hurricane Irma.
Irma is expected to rip through the entire state of Florida then move on to Georgia, the Carolinas, and Tennessee.
The loss of jobs will be the number one issue. We saw this last week when the Weekly Jobless Claims report came in higher than expected. This number is expected to continue to increase over the near-term. Gold should be supported by rising unemployment claims.
Also, I think the Fed's economic reports are going to have to be adjusted. I'm not sure they can get an accurate assessment of the economy until they get a final damage figure and this could take weeks, especially if developing Hurricane Jose becomes an issue.
I also think the hurricanes have eliminated any chance of a Fed rate hike this year. Inflation may actually move lower while the economy adjusts to the two major events.
I can't find a compelling reason for a stock market rally especially with North Korea being a wild card. So I'm leaning towards the upside for gold especially if the U.S. Dollar weakens along with stocks due to the hurricane.
This article was originally posted on FX Empire
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
